Skip to main content

Asymmetric effects of interest rate changes: the role of the consumption-wealth channel

Buy Article:

$53.17 plus tax (Refund Policy)


This article examines the role of the consumption-wealth channel in explaining asymmetric effects of monetary policy changes. Towards this end, we draw upon available literature on the consumption function and behavioural finance to construct a framework for asymmetric effects of monetary policy caused by the impact of wealth changes on aggregate consumption. We then employ data from the UK to examine the validity of the proposed framework. In the context of a liberalized economy with easy access to consumer credit, wealth reduction due to monetary tightening is expected to have weaker impact on spending than increase in wealth. Our results validate the above hypothesis.

Document Type: Research Article


Affiliations: 1: Department of Economics,Curtin Business School, Perth WA 6845, Australia 2: Department of Accounting and Finance,Birmingham Business School, University of Birmingham, Birmingham B15 2TT, UK 3: Department of Accounting, ,Finance and Economics, Business School, University of Hertfordshire, HatfieldHerts AL10 9AB, UK

Publication date: June 1, 2011

More about this publication?

Access Key

Free Content
Free content
New Content
New content
Open Access Content
Open access content
Subscribed Content
Subscribed content
Free Trial Content
Free trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more